What Are Capital Gains?

Capital gains are the profits an investor makes on certain types of investments. Real estate, precious metals, collectibles, bonds, mutual funds, stocks and options are investments for which a person can earn capital gains, according to About.com.

A capital gain results when the investor buys one of the assets included and sells it later for a higher price, explains About.com. Purchasing a home for $150,000 and selling it for $170,000 results in a $20,000 capital gain, for instance. Capital gains are reported on IRS Form 1040 Schedule D when filing a return. Selling an asset for less than the purchase price is a capital loss.